Home / Phase-5 / Pricing Strategies & Monetization Models
Phase 5
Pricing Strategies & Monetization Models
Pricing is one of the most powerful levers in product management. It shapes customer perception, drives adoption, and directly impacts revenue. This module introduces the distinction between pricing strategies (the business’s internal approach to setting prices) and monetization models (the external way customers experience pricing). We then explore the most common frameworks—from penetration and skimming strategies to subscription, freemium, and usage-based models—highlighting when to use each and what trade-offs they involve.
Pricing Strategies vs. Monetization Models
Strategy and model must align: a value-based strategy might lean on tiered subscriptions, while a penetration strategy could use bundles or freemium to win early share.
Pricing Strategies
The internal business rationale for setting prices (e.g., cost-plus, value-based, competitive).
Monetization Models
The external packaging of how customers experience pricing (e.g., subscription, tiered plans, freemium).
Core Pricing Strategies
Penetration Pricing
Set intentionally low prices to attract users and capture market share.
Best for: New entrants in highly elastic markets.
Price Skimming
Start high, then lower prices as adoption broadens.
Best for: Innovative products with no immediate substitutes.
Value-Based Pricing
Price aligned to perceived customer value, not cost.
Best for: SaaS platforms, premium B2B services.
Competitive Pricing
Benchmark against competitors’ prices, staying at or near market norms.
Best for: Mature, commoditized markets.
Common Monetization Models
One-Off Pricing
Flat-Rate Subscription
Tiered Subscription
Freemium
Usage-Based
Bundle Pricing
Dynamic Pricing
Pay What You Want
Key Takeaways
- Pricing is both an internal strategy (how you set it) and an external model (how customers see it).
- No single “best” approach exists—fit depends on market maturity, product differentiation, and customer behavior.
- Winning strategies often blend approaches (e.g., value-based pricing delivered through tiered subscriptions).
- Continuous testing and adjustment are essential to maximize adoption, revenue, and retention.